Ahead of the Bell: US Manufacturing
WASHINGTON (AP) — The Institute for Supply Management reports on U.S. manufacturing activity in October. The ISM, a trade group of purchasing managers, will release its manufacturing index at 10:00 a.m. EDT Friday.
FALL BACK: Economists forecast that the index fell to 55.1 in October from 56.2 in the previous month, according to a survey by FactSet. September's reading was the highest in 2 ½ years. Any reading above 50 indicates growth.
SOLID SURVEY: The manufacturing index has increased for four straight months. Factories added jobs in September at the fastest pace in more than a year and ramped up production, last month's survey showed. They also received new orders at a healthy pace, though slower than in August.
MIXED OUTLOOK: The survey is at odds with other manufacturing data in recent weeks that have been mixed.
Factories barely increased their output in September, the Federal Reserve said on Monday. Automakers produced more, but that gain was offset by declines at companies that make computers, furniture and appliances.
Manufacturing had shown signs of rebounding over the summer. Car sales have soared this year and overseas growth in Japan and Europe has picked up a bit, lifting exports.
But other data suggest businesses grew more cautious just before the 16-day partial government shutdown that began Oct. 1.
Companies reduced demand for long-lasting factory goods. Orders for industrial machinery, electrical equipment and other core capital goods fell 1.1 percent in September. August's orders were revised down to a 0.4 percent gain, from 1.5 percent.
Economists pay particular attention to core capital goods, which exclude aircraft and defense-related goods, because they reflect business confidence.
Analysts were encouraged by a survey of companies in the Chicago region, released Thursday, that found they expanded at the fastest pace in more than two years in October. New orders jumped and hiring also rose.
Still, economists don't expect manufacturing to boost economic growth in the coming months. Growth likely fell to an annual rate of just 1.5 percent to 2 percent in the July-September quarter, down from a 2.5 percent pace in the April-June period. Most economists expect similarly slow growth in the final three months of the year.